Hardnosed political analysis and its implications for development and business opportunities in Africa

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Africa 2016 and beyond, 3 issues for investors, policy makers and development agencies….

OK, the easy years of the Africa Rising narrative are coming to an end – now what? Cheap money from capital markets, Chinese investments and high commodities prices are over and unlikely to return soon. Finally development aid is at best constant, but more likely to decline and be redirected towards other purposes and regions.

During the last decade an emerging genuine middle class has emerged in many places. Many are now under pressure. A number of governments failed to used the additional resources to prepare the ground for future growth and social development. Below I highlight 3 issues which in my view will all be critical for Africa’s social, economic and political future, starting in 2016:

1) The demographics – the biggest risk and opportunity!

Africa presently has about 1 billion people. More than 40% are below age 20. In some places the demographic transition has not even started. Population estimates are that there will be 4 – 4.5 billion Africans by the turn of the century – or around 35-40% of world population (against 14% today). A huge market and business opportunity, but also a massive challenge for policy makers, social services, urban planners and clearly a serious risk to progress and stability if not handled properly. Basically, growth has to be 2-3% per year just to maintain per capita income, which makes 4-6% growth rates much less impressive and effective.

Most of the reports I come across – and maybe especially the ones from governments – focus too much on the positives. The private sector is a key part of the solution, but governments need to have a clear vision and not get distracted by short term goals or vested interests.

2) Confidence and innovation – the biggest inspiration and hope!

The recent 5 years have demonstrated a number of encouraging trends. Self-confidence – not just amongst the elite – is increasing. Seeing the level of innovation, ideas and debate happening amongst young people from all walks of life in places like Lagos and Nairobi is hugely encouraging, whether related to business, IT or music. Other places are following. Technology and urbanisation are clearly positive drivers.

People are getting better informed and there are encouraging examples of people taking collective action, in some or many cases despite strong resistance from whoever is in power. There is more transparency, which is slowly leading to stronger pressures for accountability, both at the micro and macro levels – or at least it’s getting harder for leaders to get away with mischief unnoticed. Going forward, the challenge is to widen-, accelerate and channel all these ideas – to make societies more productive and resilient. With global mega-shifts, a number of African elections, El Nino and the usual amount of “unknown unknowns” 2016 might be the year when leaders, businesses and development agencies will have to recognise this trend in a more structured manner.

3) Leadership and government capability – the biggest worry?

Despite all the hard work from a large number of political leaders, technocrats and others, the nature of politics has not changed much in many places. There are still too many places where the state is based on patronage and rent-seeking, which crowds out the effectiveness of growth and development objectives. The positive rhetoric is gaining strength, but when it’s crunch time too often leaders are constrained by a weak system (or, in some cases – they themselves are part of the problem), which undermines good decisions.

Some countries have clear lessons from the last 5-10 years on the need for a step-change in the approach to the public sector. A few countries have made impressive progress already – others may be forced by crisis to rethink their approach. Urban middle class and youth will increasingly be a driver although some countries are still 5-10 years away from that. Expect increased tension – some leaders will react with even more populist and divisive approaches. The good news is that a few relatively simple improvements would lead to massive unlocking of growth potential. Businesses will have to manoeuvre carefully.

There are obviously lots of other issues and trends to consider and equally I have used very generalised and simplified points even if there are very significant country differences. Please challenge me, disagree or educate me in your comments – the above is entirely my personal views and attempt to get people thinking about these issues. I hope you enjoyed the read.